Is new construction back? Residential building permits up 35 percent in Washtenaw County
Daniel Brenner | AnnArbor.com
New home construction is slowly making a comeback in Washtenaw County.
That’s the message from local builders, real estate experts and county-specific data, which show residential building permits were up 35 percent in 2012 compared with the previous year.
“We’re actually starting to see new home construction come back pretty strong right now,” said Maureen Sloan, chief executive officer of the Builders & Remodelers Association of Greater Ann Arbor.
“It appears the low inventory (of homes for sale) has prompted many people to look at new construction to get what they’re looking for,” she continued.
Houses are being built in subdivisions where construction was mostly stagnant for years, including Scio Township’s Polo Fields, Legacy Heights in Saline and Kirtland Hills in Pittsfield Township. Meanwhile, regional and national players like Trowbridge Companies and Toll Brothers have re-entered the Washtenaw County market with plans to build several dozen homes.
Washtenaw County permits for single-family home construction totaled 315 in 2012, up 35 percent from 2011 and nearly double the amount of permits filed in 2009, according to data compiled by the Southeast Michigan Council of Governments (SEMCOG).
Pittsfield Township led the county in new construction, with 107 homes built in 2012 compared with 33 homes in 2009. Other leaders in the county were Dexter, with 31 homes built last year, and Scio Township, with 27 homes built.
“There has been a huge upsurge of interest,” said Doug Selby of Ann Arbor’s Meadowlark Builders, which specializes in green building and remodeling. “I would say we’ve had up to triple the amount of leads for new homes just since the third quarter of 2012.”
These construction trends in Washtenaw County are reflective of developments both regionally and nationally; the Home Builders Association of Michigan predicts 14,000 residential building permits this year in Michigan, while U.S. home construction rates are the highest in years.
To be sure, the number of new homes is low compared with Washtenaw County’s construction boom from 2000 to 2005, when builders were adding 1,100 to 2,000 houses each year.
And because many current projects are ones that were stalled for years, Washtenaw County hasn’t experienced a significant uptick in the land values that plummeted during the recession, said Richard Timmons of Colliers International.
“We’ve seen a little interest in vacant land, but not a great deal,” he said. “As (developers) absorb existing lots, we would anticipate that we’d see an increase in land values that we haven’t seen yet.”
Local homebuilder Jim Haeussler of Peters Building Co. said in order for the county to return to a “normal market,” home sale prices have to rise at least 10 percent to 15 percent.
The average home sale price in the county was $210,616 in 2012, a 15.5 percent increase since 2009 but still low compared with sale prices a decade ago, according to the Ann Arbor Area Board of Realtors. The board’s data doesn’t separately track new home sales, but the U.S. Department of Housing and Urban Development shows the average sale price of new homes in December was $304,000.
“A house/lot combination is still selling below what it would cost to reproduce today it’s not sustainable because nobody is going to go out and develop a lot to lose money.”
Still, Haeussler and other builders are encouraged; Haeussler said he’s currently working on more than 25 homes on already-developed lots — a significant improvement over the past few years. He’s also developing “spec” homes, which shows his confidence in the market.
“We’ve been fortunate in that anything we had as a spec has been sold and we’re building some more,” he said. “At the current time, if we start a spec home, it’s usually sold by the time it gets framed.”
He is currently working on homes in Kirtland Hills in Pittsfield Township, Legacy Heights in Saline, Dexter Crossing and Westridge in Dexter, and Harwood Farms in Saline.
Haeussler attributes that demand to the low inventory of homes for sale in the county and increasing employment. Selby agreed, adding that historically low interest rates and bank lending trends are bringing more people to the market.
Jim Acheson of Ann Arbor’s Acheson Builders, a company that specializes in remodeling homes, said his business was up 100 percent last year. Thanks to improving economic factors, he said more people in the county are choosing to invest in existing homes.
“It’s encouraging,” he said. “It looked pretty bleak for a while.”